The world of prime real estate can be complex and difficult to navigate. HNW borrowers often have complex needs that make them unsuitable for traditional mortgages. With this in mind there are mortgage products tailored to meet the needs of HNW individuals, from complex international borrowing structures to unique income profiles. This article will define high-net-worth property funding and explain how it can be accessed in the UK market.
What is High-Net-Worth Property Funding?
To be considered a high-net-worth individual (HNWI) in the UK, you have to meet the FCA’s criteria, which currently means you have to earn over £300,000 annually or ownership of assets exceeding £3 million. HNWI are subject to less-stringent regulations as a result of their status, enabling them to access bespoke lending solutions tailored specifically to their needs.
Key Features of High-Net-Worth Property Funding
1. Loan Structures
Where traditional, standard mortgages provide funding to typical borrowers, with straightforward income structures, HNW property funding can be tailored to meet the specific needs of HNW individuals. One of the ways in which HNW property loans do this is by considering the client’s wider wealth picture. This is likely to include multiple income streams, assets under management or alternative assets. By offering a higher degree of flexibility, HNW property loans enable borrowers to structure complex loans that would not otherwise be possible under FCA regulations.
2. Loan Sizes
Where traditional mortgage finance can be used for any amount, HNW property finance is generally used for loans upwards of £1 million. While the loan size is determined by the lender, they often have a greater degree of flexibility when it comes to HNWI. It is important to note that, while there is no upper limit on the size of the loan, some lenders prefer not to fund high-value single assets as this may overexpose them to risk.
3. Flexible Repayment
As is the case with loan sizes, HNW property loans are often subject to more flexible repayment options. Where traditional mortgages often have strict repayment terms, HNW property finance can be tailored to meet the needs of the borrower. Some examples of this is where high-net-worth clients are able to elect for retained interest, bullet repayments or longer term mortgages. It is important to consider the repayment terms of your mortgage prior to application, as many lenders will not permit changes to these terms after the mortgage has begun.
4. Asset-Based Lending
Where traditional mortgages rely solely on a borrower’s earned income as a basis of their lending decision, HNW lenders are able to take into account investment portfolios, company shares and other assets. This is a very useful approach for borrowers who have a diverse range of assets and incomes.
5. International Client Expertise
Another important factor to consider is that most traditional lenders can only lend to UK residents, whereas HNW are afforded greater flexibility on their lending criteria. HNW lenders are able to lend to non-residents, offshore companies and complex international structures.
Key Considerations When Arranging High-Net-Worth Property Finance
1. Engage Specialist Advisers
Navigating the network of HNW lenders to find the right lender with the right product for your requirements can be a tricky task. With this in mind, the services of a specialist HNW mortgage broker can prove invaluable. HNW mortgage advisors have a deep understanding of the lending environment and are able to skillfully guide their clients to ensure they have access to the best products from the best lenders.
2. Understand Costs
There are a number of different “hidden” costs and fees associated with getting a mortgage, it is important to ensure you understand these costs prior to applying for a mortgage. While interest fees will generally make up the bulk of the costs of a mortgage, application fees, legal fees, valuation fees and arrangement fees can add up to a significant amount.
3. Currency
Another important point to consider is the currency of the loan. International clients may prefer to borrow in currencies other than GBP such as EUR or USD.
Final Thoughts
High-net-worth property funding is used by HNW borrowers throughout the UK to fund their property projects. Where traditional, regulated finance may not be a viable option for high-net-worth individuals, HNW mortgages offer them the flexibility they need in order to access property finance. Furthermore, navigating the HNW property loan landscape can be tricky, with hundreds of lenders each offering their own, unique products. With this in mind, the services of a skilled HNW mortgage broker can prove invaluable in securing the right finance for your next property-related project.